Tax Residency Certificate (TRC)

Introduction

In today’s interconnected global economy, many individuals and businesses earn income across multiple countries. As cross-border transactions and international investments increase, managing tax obligations has become more complex. A key instrument in addressing these challenges is the Tax Residency Certificate (TRC).

The TRC serves as essential proof of a taxpayer’s residency status and plays a vital role in preventing double taxation under the Double Taxation Avoidance Agreements (DTAAs). It ensures that the same income is not taxed twice—once in the source country and again in the country of residence.

This article provides a comprehensive overview of the Tax Residency Certificate, its significance, and the process for individuals and businesses in India to obtain and benefit from it.

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What is a Tax Residency Certificate (TRC)?

A Tax Residency Certificate (TRC) is an official document issued by the tax authorities of a country to confirm that an individual or business is a tax resident of that country for a particular financial year.

This certificate is essential for claiming tax relief under Double Taxation Avoidance Agreements (DTAAs) between two countries, ensuring that the same income is not taxed twice.

For example, if an Indian resident earns income in a foreign country, that foreign country (the source country) may tax the income. At the same time, India (the resident country) could also levy tax on the same income. In such cases, a TRC allows the taxpayer to establish their residency status and claim DTAA benefits, thus avoiding double taxation.

Who Can Obtain a Tax Residency Certificate?

To obtain a TRC, an applicant must qualify as a tax resident of India under the Income Tax Act, 1961. The certificate can be issued to the following categories:
- Individuals: Those classified as Resident and Ordinarily Resident (ROR) under Section 6 of the Income Tax Act.
- Non-Resident Indians (NRIs): NRIs require a TRC from their country of residence to claim DTAA benefits on income earned in India.
- Businesses and Entities: Companies, partnerships, and trusts with cross-border income must obtain a TRC from their country of residence to avoid double taxation on international income.

Tax Residency Certificate for NRIs

Non-Resident Indians (NRIs) can claim benefits under DTAA by furnishing a Tax Residency Certificate issued by the tax authority of their resident country. This certificate enables them to seek tax relief on income earned abroad, including:

Income generated from assets located overseas
Payments for services rendered abroad
Salary income earned in a foreign country
Interest income from foreign savings or fixed deposits
Dividends from shares and mutual funds held abroad
Revenue from the sale of agricultural products overseas
Capital gains from the sale or transfer of property abroad

By submitting a valid TRC, NRIs can ensure that their foreign income is taxed correctly under DTAA provisions and avoid being taxed twice on the same income.

Importance of a TRC for Individuals and Businesses

1. The primary purpose of a TRC is to establish tax residency and enable the taxpayer to claim DTAA benefits, thus preventing double taxation. Other key benefits include:
  - Proof of Residency:
    A TRC serves as official proof of your residency in a particular country, helping establish where you are primarily liable to pay taxes.
  - DTAA Benefits:
    Many countries have DTAA arrangements that offer reduced tax rates on income such as dividends, interest, royalties, and capital gains. A TRC is essential to access these benefits.
  - Essential for NRIs and Foreign Companies:
    NRIs and foreign entities earning income in India (or vice versa) must provide a TRC to confirm their tax residency status. Without it, they may face full tax liability in both jurisdictions.

Benefits of a Tax Residency Certificate

1. A TRC provides several advantages for individuals and businesses engaged in international transactions or investments:
  - Avoids Double Taxation:
    Ensures that income is not taxed in both the source and resident countries.
  - Enables Lower Withholding Taxes:
    TRCs help taxpayers benefit from reduced tax rates on:
    - Dividends: Lower rates under DTAA provisions.
    - Royalties and Interest: Reduced tax rates on such income earned abroad.
  - Acts as Proof for Financial Transactions:
    Many financial institutions and governments require a TRC as proof of tax residency for international dealings, bank account openings, or investments.
  - Ensures Compliance with Tax Laws:
    A TRC supports compliance with international taxation norms and provides the necessary documentation when filing tax returns in multiple jurisdictions.

Validity of a Tax Residency Certificate

A Tax Residency Certificate remains valid until the end of the financial year from the date of issue.
Taxpayers must reapply each year to continue availing DTAA benefits in subsequent financial years.

Key Details Included in a TRC

While the specific format may vary between countries, a TRC generally contains the following details:
- Name of the taxpayer
- Taxpayer Identification Number (TIN) or Permanent Account Number (PAN)
- Nationality (for individuals) or country of incorporation (for companies)
- Residential or registered address
- Period of validity of the certificate
- Name and seal of the issuing tax authority
Note: If the TRC is issued in a language other than English, it is advisable to have it translated into English for submission or use in India.

Tax Residency Certificate Format

While the format of a Tax Residency Certificate (TRC) may vary slightly between countries, most follow a standard structure that includes key taxpayer information.
Below is the typical format of a TRC issued in India, followed by important related concepts such as residential status, eligibility, and the application process.

Residential Status Under the Indian Income Tax Act

Before learning how to obtain a TRC, it’s essential to understand residential status, as it determines a person’s tax liability under Indian tax laws.
1. Resident and Ordinarily Resident (ROR)
An individual is classified as an ROR if they:
- Stay in India for 182 days or more during a financial year, or
- Stay in India for 730 days or more in the preceding seven years.
An ROR is taxed on their global income, meaning both Indian and foreign earnings are taxable in India.
2. Resident but Not Ordinarily Resident (RNOR)
An individual qualifies as an RNOR if they:
- Have been non-resident for 9 out of the 10 preceding years, or
- Have stayed in India for 729 days or less during the preceding seven years.
RNORs are taxed only on income earned or accrued in India.
3. Non-Resident (NR)
A person is considered a Non-Resident if they stay in India for less than 182 days during a financial year.
Non-residents are taxed only on income earned or accrued in India.

Eligibility Criteria for Obtaining a Tax Residency Certificate (TRC)

To obtain a TRC, applicants must satisfy specific conditions. The main eligibility requirements include:
- Tax Residency Status: The applicant (individual or business) must be recognized as a tax resident of the issuing country.
- Business Establishment: Business entities should have a permanent place of establishment or operations in the country issuing the TRC.
- Proof of Residency: Individuals must submit valid proof of residence, such as a domicile or residence certificate, utility bills, or government-issued ID.

How to Apply for a Tax Residency Certificate in India

The process of obtaining a TRC in India involves the following steps:
Step 1: Determine Eligibility
You must qualify as a resident of India under Section 6 of the Income Tax Act, 1961, to apply for a TRC.
Step 2: Fill Form 10FA
Submit Form 10FA to the Income Tax Department. This form serves as an official application for the issuance of a TRC and requires details such as:
- Full name and address
- Permanent Account Number (PAN)
- Country for which the TRC is needed
- Financial year for which the certificate is requested
Step 3: Submit Supporting Documents
Attach relevant documents with Form 10FA, including:
- Proof of residence in India
- Copy of the latest income tax return
- Passport (for NRIs)
- Aadhaar card and PAN card
Step 4: Issuance of Form 10FB
Upon verification, the Assessing Officer issues Form 10FB, which serves as the Tax Residency Certificate confirming your residency status for the specified year.
Step 5: Using the TRC
Once issued, the TRC can be submitted to the foreign tax authorities or used while filing returns in both India and the source country to claim DTAA benefits and avoid double taxation.

How to Obtain a TRC in India for NRIs

- Name of the taxpayer (individual or entity)
- Status (individual, firm, company, etc.)
- Aadhaar or PAN (if applicable)
- Nationality (for individuals) or Country of Incorporation (for entities)
- Tax Identification Number (TIN)
- Period of residency as per Section 90(4) or 90A(4) of the Income Tax Act
- Residential address in the country of residence
  Non-Resident Indians (NRIs) earning income in India must provide a Tax Residency Certificate from their country of residence to claim DTAA benefits. The process typically includes:
  1. Apply to Tax Authorities in the Resident Country
  NRIs must apply for a TRC with the tax authority of their resident country. Application methods vary—some countries offer online portals, while others require in-person submissions.
  2. Submit Supporting Documents
  Applicants must submit documents to verify their tax residency, such as:
  - Tax returns filed in the resident country
  - Passport copy (for identity verification)
  - Proof of residence (residency card, lease agreement, or utility bills)
  3. Furnish Form 10F to Indian Authorities
  If the TRC issued abroad does not include required details—such as nationality, Tax Identification Number (TIN), or address—NRIs must also file Form 10F along with the TRC when submitting documents to Indian authorities.
  This ensures compliance with Indian DTAA regulations.
  Information Required in a TRC
  When applying for a Tax Residency Certificate, the following details are generally required:

Challenges in Obtaining a TRC

While the process may appear straightforward, applicants often face certain challenges:
- Document Verification:
  The Income Tax Department conducts detailed verification. Any discrepancy may lead to rejection or delay.
- Processing Time:
  It can take several weeks for the TRC to be issued. Applicants are advised to apply well in advance.
- Dual Compliance:
  NRIs must adhere to the tax laws of both India and their country of residence, which can involve complex compliance requirements.

Common Misconceptions about TRC

TRC is not permanent:
A TRC is valid only for a specific financial year and must be renewed annually.
TRC is not limited to NRIs:
Indian residents with foreign income also require a TRC to claim DTAA benefits.
TRC does not exempt all taxes:
A TRC provides tax relief or reduced tax rates under DTAA but does not grant total exemption from tax liability.

About the Author

Vinod

Vinod is a seasoned legal writer skilled at simplifying complex legal concepts into clear, practical insights. His work helps entrepreneurs confidently navigate legal obligations and build businesses that are both compliant and sustainable.

January 8, 2026